NOTE 6.

INVENTORY

As of September 30, 2011, our inventory was comprised of Altrazeal® finished goods, manufacturing costs incurred in the production of Altrazeal® and Aphthasol®, and raw materials. Inventories are stated at the lower of cost (first in, first out method) or market. Appropriate consideration is given to deterioration, obsolescence, and other factors in evaluating net realizable value. Inventory consisted of the following at September 30, 2011 and December 31, 2010:

Inventory	September 30, 2011		December 31, 2010
Finished goods	$	411,295	$	450,820
Work-in-progress		507,537		296,485
Raw materials		33,239		70,999
Total	$	952,071	$	818,304